New U.S. limit for informal entries benefits express

Tuesday, December 11, 2012

Life got easier last week for importers of low-value consignments when U.S. Customs issued a rulemaking increasing the threshold for informal entries to $2,500 from $2,000, effective Jan. 7.
Informal entry expedites customs clearance because it requires a much simpler document, eliminates the need for a surety bond and reduces the $25 minimum merchandise processing fee to $2 (for entries filed electronically).
Business groups have been pushing for the change for more than two years and the United States and Canada had committed as part of their Beyond-the-Border Initiative in 2011 to harmonize how low-value shipments are treated. Canada has already raised its informal entry threshold to $2,500 from $1,600.
Informal entry differs from de minimus - the $200 level at which shipments listed on a carrier's manifest are admitted without taxes, tariffs or formal customs procedures at all.
Under informal entry, duties may still be required, but the simpler process means an individual or small business can file the paperwork on their own, possibly with the assistance of an express delivery company but without requiring the services of a customs broker.
There are about 5 million informal entries per year, according to a 2011 policy brief published by The Peterson Institute for International Economics. About half a million more shipments would qualify as informal entries under the new requirements published in the Federal Register. Importers now will realize an estimated $13 million in annual savings from reduced fees, according to Customs and Border Protection.
The rule also eliminates a long list of exceptions - mostly for apparel and footwear products - to informal entry that were a vestige from the era of quotas designed to protect domestic producers.
"It's a real step forward. It's going to facilitate trade for small-and-medium-size companies and individual consumers that deal a lot with lower value shipments," Michael Mullen, executive director of the Express Association of America, said.
Express carriers will also benefit from not having to retain documents and records for shipments that previously fell in the formal entry category.
One of the stated reasons for the rule change is to factor in the effects of inflation on product values. In its ruling, CBP acknowledged that the limit should be $2,800 to account for inflation during the past dozen years, but said it couldn't go beyond the statutory maximum of $2,500.The Peterson Institute paper, written by senior fellow Gary Clyde Hufbauer and Government Accountability Office senior analyst Yee Wong, said lowering the informal entry limit would free up CBP resources to focus on high-risk shipments, reduce delays in delivering cargo and mail, and reduce fees and administrative costs for shippers and carriers.
"In fact, the resources that can be freed up are located not only in CBP but also in the express shipping firms (DHL, FedEx, TNT, and UPS) and the US Postal Service (USPS). Employees will need to spend much less time on arcane customs forms and small amounts of revenue and instead can spend much more time on important matters like counterfeit merchandise, illegal drugs, food safety, and of course terrorist threats," Hufbauer and Wong said.
They estimated that informal entry procedures could save, on average, about two days in delivery time because of the normal steps to check out new shippers, verify their tariff codes and rates, and secure power of attorney - steps that don't need to be repeated for established customers.
The net gain from raising the informal entry threshold would be $81 million per year, taking into account the cost savings to all affected parties (shippers, express firms, U.S. Postal Service and CBP), the paper said. - Eric Kulisch